Demand. Demand is the quantity of a commodity a consumer is willing and able to buy

DemandDemand

Demand is the quantity of a Demand is the quantity of a commodity a consumer is commodity a consumer is willingwilling

and and ableable to buy. to buy.

The law of demandThe law of demand

As the As the priceprice increases, the increases, the quantityquantity demanded decreases, demanded decreases, ceteris paribusceteris paribus..

This also works in the opposite direction This also works in the opposite direction e.g. Price down quantity upe.g. Price down quantity up

Ceteris paribusCeteris paribus means everything means everything else is held constant and only price is else is held constant and only price is allowed to change. We know in reality you allowed to change. We know in reality you can’t do this but just pretend.can’t do this but just pretend.

Demand SchedulesDemand Schedules

This is a table that shows the quantity of a This is a table that shows the quantity of a good or service a consumer is willing and good or service a consumer is willing and able to buy at each priceable to buy at each price

TITLETITLE: Lillie’s Demand for chips : Lillie’s Demand for chips per weekper week

LabelLabel: Price ($): Price ($) LabelLabel: Quantity: Quantity

11 55

22 33

33 22

44 11

Lilly's Demand for Chips

0

1

2

3

4

5

6

1 2 3 4

Quantity

Pri

ce (

$)

TALLTALL

TitleTitle

AxisAxis

LabelsLabels

LineLine

TALL helps us remember the key points to TALL helps us remember the key points to draw an accurate line graph.draw an accurate line graph.

Change in the Change in the QuantityQuantity Demanded Demanded

PricePrice is the only thing that will change the is the only thing that will change the quantity demanded.quantity demanded.

A change in price moves you along the Demand A change in price moves you along the Demand curve.curve.

An increase in price causes a decrease in the An increase in price causes a decrease in the QuantityQuantity demanded demanded

An decrease in price causes an increase in An decrease in price causes an increase in QuantityQuantity demanded demanded

Price and quantity move in Price and quantity move in opposite directionsopposite directions

LAW OF DEMANDLAW OF DEMAND

P

$

QD

As price decreases then quantity demanded increases or as price increases quantity

demanded decreases, ceteris paribus.

Do this nowDo this now

1.Construct a demand schedule based on the information above. Remember your labels2.Identify the quantity Rena would demand at the current price of $1.00. 3.Explain why Rena’s quantity demanded of peanut slabs falls as the price rises

D

D

Movement along the demand Movement along the demand curvecurve

We use the term quantity demanded when we are describing a change in price. This is illustrated by a movement along the demand curve.

Go to workbooks page 28. Read the box up the top and begin exercises below.

Price increases to 1.25

Show these effects

Locate new quantities and prices

Draw in arrowsLabel.

Q1

p1

Q2

p2

Market DemandMarket Demand

Is the total demand that all individual Is the total demand that all individual consumers in that market are willing and consumers in that market are willing and able to buy at various prices at a particular able to buy at various prices at a particular point in timepoint in time

How much the whole market will buyHow much the whole market will buy

Market Demand Schedules and Market Demand Schedules and CurvesCurves

Found (derived) by adding horizontally, all the Found (derived) by adding horizontally, all the individual consumers demand schedules and individual consumers demand schedules and curves. curves.

Demand Schedule for Cans of Soft Drink (weekly)

Price ($) Rebecca Quantity

Hilary Quantity

Maree Quantity

Market Quantity

.50.50 77 44 66

1.001.00 44 33 33

1.501.50 22 11 22

7+4+6 =17

4+3+3=10

2+1+2=5

Text Book page 24Text Book page 24

Questions 1-5Questions 1-5